REG - Financial Conduct - FCA warns BNPL firms about misleading adverts

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19/08/2022 08:15

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RNS Number : 5913W  Financial Conduct Authority  19 August 2022

FCA warns Buy Now Pay Later firms about misleading adverts

 

The Financial Conduct Authority (FCA) has warned firms that offer Buy Now Pay
Later (BNPL) products that although some agreements are unregulated the
financial promotions of all BNPL products must comply with the financial
promotion rules.

 

Unauthorised firms might be committing a criminal offence if they don't have
an FCA-authorised firm approve their financial promotions.

 

Authorised firms selling unregulated or exempt BNPL products must comply with
the relevant rules unless an exemption applies. This includes that their BNPL
financial promotions must be clear, fair and not misleading.

 

The FCA is concerned consumers could be misled if BNPL financial promotions do
not comply and has seen financial adverts on websites and social media,
including posts by social media influencers, which may breach FCA rules. For
example, adverts emphasising the benefits of BNPL products without fair and
prominent warnings of any risks to customers, such as: 

 

·      the risk of taking on debt that customers cannot afford to
repay 

·      the consequences of missed payments 

·      any other adverse consequences such as the impact on the
customer's credit file

·      information about when charges become payable

 

Sheldon Mills, Executive Director of Consumers and Competition at the FCA,
said: "As we face a cost-of-living crisis, consumers are having to make
difficult decisions about their finances and how they pay for goods and
services.

 

"Firms need to ensure consumers, particularly those in vulnerable
circumstances, are equipped with the right information at the right time, so
they can make effective, timely and properly informed decisions. It is vital
that adverts are clear, fair and not misleading."

 

Although the FCA does not yet regulate BNPL products it has been proactively
addressing concerns about potential harms to consumers.

 

The FCA recently held a roundtable with BNPL providers to discuss upcoming
regulation and called on firms to do more to support borrowers in financial
difficulty, including signposting to money guidance and debt advice.

 

Earlier this year the FCA worked with BNPL firms to secure changes to
potentially unfair and unclear terms in BNPL contracts
(https://www.fca.org.uk/news/statements/fca-drives-changes-buy-now-pay-later-bnpl-firms-contract-terms)
using powers under the Consumer Rights Act.

 

The FCA is continuing to engage with BNPL providers and are proactively
monitoring the market to ensure expectations are met. The FCA has confirmed it
will use criminal and regulatory enforcement powers if it sees promotions that
do not comply. So far this year, FCA action against firms that have breached
its rules have led to 4,226 promotions being changed or withdrawn.

 

Notes to editors

 

·      The FCA has written to BNPL providers
(https://www.fca.org.uk/publication/correspondence/bnpl-dear-ceo-letter-2022.pdf)
and the British Retail Consortium
(https://www.fca.org.uk/publication/correspondence/british-retail-consortium-bnpl-letter.pdf)
.

·      A financial promotion is an invitation or inducement to enter
into an agreement. A financial promotion for BNPL is any form of communication
made across any media in the course of business, that invites a consumer to
purchase a good or service by entering a BNPL agreement. This includes, for
example, posters in shop windows, paid for Google ads, and posts made by
influencers on social media.

 

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